Royal Mail

Caroline Dinenage Excerpts

Tuesday 25th June 2013 Westminster Hall

[Caroline Dinenage (Gosport) (Con)]

It is a pleasure to serve under your stewardship, Mr Davies. I congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing this important debate.

As the hon. Lady says, Royal Mail is an essential part of Britain’s social and economic fabric. One of the UK’s largest companies, it has more than 150,000 employees and a turnover approaching £9 billion. In 2012, research from the Centre for Economics and Business Research found that, in terms of Royal Mail’s economic footprint, its core UK business ranks as the eighth largest organisation in the UK. It contributes nearly 0.5% to the UK’s total GDP, rising to 0.7% when its wider economic impacts are included. That means that, for every £1 Royal Mail pays in wages, an additional 57p is generated elsewhere in the economy; it is a massive organisation by anyone’s standards, and one that is operating in a fast-moving and ever-changing marketplace. Like any business of that scale, the key to Royal Mail’s future success is access to the flexible capital that it needs to innovate and invest.

My first real involvement with Royal Mail came back in the ’90s, when I was running my own small business. In the days before e-mail, as I am sure everyone recalls, we had a daily collection for franked mail, through which we sent out all our mailshots, quotes, artwork and invoices, as well as the products that we manufactured. Now, all those things, other than the products themselves, are sent electronically. My business, like many others, has seen a massive fall in its use of the post. Conversely, of course, there are other small businesses across the UK for which the internet has been the catalyst for a massive increase in their use of Royal Mail, with the growth of online shopping, eBay and mail order.

On average, the spend on post by small businesses is quite low—just £9 a month for the average micro-business. Royal Mail has always kept the needs of business customers at its heart, as far as I can tell. Prices of franking services used by businesses have lagged behind inflation for many years and continue to do so. Franking customers benefit from good prices and significant discounts, but even so, as the hon. Lady said, the marketplace is increasingly competitive. Many large businesses, such as banks and utility companies, already employ one of Royal Mail’s rivals, such as TNT and UK Mail, to collect bulk mail. According to its website, UK Mail is the UK’s self-styled leading alternative mail service provider and claims to handle more than 2 billion letters per annum and to support more than 1,000 businesses. To survive in the face of such competition, Royal Mail needs flexibility to act in the most businesslike way possible.

I was also on the Business, Innovation and Skills Committee’s visit to Glasgow, which the hon. Member for Glasgow North (Ann McKechin) mentioned a moment ago, and I was struck by how unbusinesslike the Royal Mail’s spokesperson was in his approach to potential Scottish independence. I found that shocking. Royal Mail must act in a more businesslike way, and it needs to improve its efficiency to invest and innovate, which means that it needs access to the capital that other large companies enjoy so that it is sustainable over the long term.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Lady is accurately outlining the change in the business climate in how often small businesses use the post, but she is also outlining Royal Mail’s need to be adaptable. Does she understand that, as we have already heard, Royal Mail’s profit in the past 18 months has increased considerably in the face of all that she has just outlined? It is in the public domain that Royal Mail is earning a significant profit, which should continue to be the case.

[Caroline Dinenage]

The hon. Gentleman makes an excellent point, but for any business to continue, it cannot just look at what it is doing now; it must consider future challenges. As we have already heard, the self-styled rivals to Royal Mail offer daily challenges, and any company with long-term aspirations must be able to innovate, invest and grow in the future. That is the problem. At the moment, Royal Mail is competing for scarce public capital against other priorities such as schools and hospitals. Unless Royal Mail can access equity markets, every £1 that it borrows is another £1 on the national debt.

[Robert Flello]

I am listening carefully to the hon. Lady, but I do not recognise some of the things she is talking about. From my experience, the work force in Stoke-on-Trent have gone through incredible change and have adapted to new systems. Indeed, they are so efficient that I sometimes wonder how on earth our postal workers manage to do some of the things they are being asked to do. There is new equipment and new vans. There has been huge investment, and the work force have adapted incredibly to very stringent business standards. I really do not recognise the picture that she is painting when I see for myself what is happening in places such as Stoke-on-Trent.

[Caroline Dinenage]

I am sure Stoke-on-Trent is a fabulous paragon of what our wonderful mail services do—as is Gosport, I hasten to add. I do not think anyone today is in any way casting aspersions on either the service or the quality that Royal Mail delivers; we are talking about how to ensure that Royal Mail is able to continue doing that in the long term when we are facing other challenges to the public purse. Clearly, adding further to the national debt would not be responsible in the current environment, especially when Royal Mail can run on a fully commercial basis and already has the capacity to be profitable, as we have heard.

Royal Mail has the highest service specification of any major European universal postal service: 93% of first-class mail is delivered the next working day and 99.9% of delivery routes are completed each day. But I argue that the quality of service framework that applies to Royal Mail under public ownership would continue to apply under private ownership. We talk about private businesses being interested only in shareholder profit, but having run a private business for more than 20 years, we are also very keen on quality of service and maintaining our customers, which must be taken into consideration.

Leading postal operators that provide universal postal services in other European countries have moved into the private sector and been successful. The Austrian postal service and Deutsche Post, for example, have delivered consistently high mail profitability since flotation, and Deutsche Post is perceived as being in the vanguard of digital transition. Furthermore, levels of service have remained consistently high. In 2012, for example, the proportion of letters delivered the next day in Germany and Austria was 95%, compared with the 93% regulatory target in the UK. Those and other international examples show private sector investment delivering competitive, profitable postal frameworks without necessarily compromising on service levels.

The Government say that their overarching objective is to safeguard the one-price-goes-anywhere, six-days-a-week universal service, to deliver taxpayers value for money and to deliver customers the quality of service that they are used to. The best way to safeguard the universal service for future generations is to combine the best of both the public sector and the private sector and to give Royal Mail the independence, flexibility and, above all, access to the investment it needs to face future challenges.